Government extends timeline for states to join UDAY scheme

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Updated: June 25, 2016 9:28:51 AM

The Cabinet on Wednesday extended the deadline by a year to March-end next year for states to sign up for UDAY, a scheme aimed at improving the financial and operational performance of state-owned power distribution companies. The scheme had closed for participation on March 31, 2016.

UDAYUnder UDAY, the states are required to take over 75% of the discoms’ liabilities and issue bonds against the same in a span of two years. Further, the discom is also mandated to issue bonds against the remaining liability. (Reuters)

The Cabinet on Wednesday extended the deadline by a year to March-end next year for states to sign up for UDAY, a scheme aimed at improving the financial and operational performance of state-owned power distribution companies. The scheme had closed for participation on March 31, 2016.

The scheme has managed to rope in 10 states — Rajasthan, Uttar Pradesh, Chhattisgarh, Jharkhand, Punjab, Bihar, Haryana, Gujarat, Uttarakhand and Jammu & Kashmir. However, despite in-principle approval from nine more states, they have been unable to furnish the extensive district-wise data on commercial losses that the scheme requires. These states will now have the current fiscal to come on board UDAY and issue bonds for the half the discoms’ debt.

The scheme has been designed to relieve discoms from the interest cost burden due to massive short-term liabilities to the tune of over `4 lakh crore. Under UDAY, the states are required to take over 75% of the discoms’ liabilities and issue bonds against the same in a span of two years. Further, the discom is also mandated to issue bonds against the remaining liability. This would lead to a reduction in discoms’ interest cost by nearly 4%, which allows the power companies to purchase power.

With this approval for extension of timeline, the states will take over 75% of discoms’ debt as on September 30, 2015, by March 31, 2017, by issuing bonds, an intervention to lower the interest burden of debts.

In the year 2015-16, bonds worth `99,541 crores were floated by the participating states to clear 50% of the outstanding debt of discoms. Further, as per the requirement of the scheme, discoms bonds worth `11,524 crore were floated. In the current fiscal, bonds worth `14,801 crore have been floated by Uttar Pradesh.

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